June 22 (Bloomberg) -- When Sonja Zozula and Jerry Anderson
founded LightSaver Technologies Inc. in 2009, everyone told them
they should make their emergency lights for homeowners in China.

After two years of outsourcing to factories there, last
winter they shifted production to Carlsbad, California, about 30
miles (48 kilometers) from their home in San Clemente. “It’s
probably 30 percent cheaper to manufacture in China,” Anderson
says. Besides hassles including shipping, “it’s a question of,
‘How do I value my time at three in the morning when I have to
talk to China?’” he says.

As costs in China rise and owners consider the challenges
of using factories 12,000 miles and 12 time zones away, many
small companies have decided manufacturing overseas isn’t worth
the trouble. American production is “increasingly competitive,”
says Harry Moser, founder of the Reshoring Initiative, a group
of companies and trade associations trying to bring factory jobs
back to the U.S. “In the last two years there’s been a dramatic
increase” in the amount of work returning.

An April poll of 259 American contract manufacturers --
which make goods for other companies -- showed 40 percent of
respondents benefited this year from work previously done abroad,
Bloomberg Businessweek reports in its June 25 issue. Nearly
80 percent were optimistic about 2012 sales and profits,
according to the survey by MFG.com, a website that helps
companies find manufacturers.

‘They’re Miserable’

“A decade ago you just went to China. You didn’t even look
locally,” says Ted Fogliani, chief executive officer of
Outsource Manufacturing Inc., the San Diego company working with
LightSaver. “Now people are trying to come back. Everyone knows
they’re miserable.”

For LightSaver, the decision was simple. Neither of the
founders has ever been to China, which made communicating with
manufacturers difficult. Components that were shipped from the
U.S. sometimes got stuck in customs for weeks. And Anderson had
to spend hours on the phone to explain tweaks in the product.

“If we have an issue in manufacturing, in America we can
walk down to the plant floor,” Anderson says. “We can’t do
that in China.” Anderson says manufacturing in the U.S. is
probably 2 percent to 5 percent cheaper once he takes into
account the time and trouble of outsourcing production abroad.

Coming Home

Dana Olson makes a living convincing small manufacturers
that it pays to produce domestically. About 10 percent of the
roughly 60 companies that his Minneapolis firm, Ecodev LLC, has
worked with have moved manufacturing to the U.S. or decided not
to send it overseas, and another half-dozen are considering
similar moves.

“There’s a growing sense, with the economy doing what it’s
doing, of U.S. companies wanting to produce in the United
States,” says Olson. “It’s very important to them to have
‘Made in the U.S.A.’ on their label again.”

Since 2008, Ultra Green Packaging, one of Olson’s clients,
has used manufacturers in China to make compostable plates and
containers from wheat straw and other organic materials. By
year-end, Ultra Green expects to start producing the bulk of its
wares at a plant in North Dakota to cut freight costs and
protect its intellectual property.

“They’re infamous over there for knocking off” products,
says Phil Levin, chairman of the 10-employee company. “All
anybody needs to do is find a different factory and make a
mold.”

FDA Approval

For Unilife Corp., moving production to the U.S. helped it
win regulatory approval for pre-filled syringes with retractable
needles that make it almost impossible for medical personnel to
accidentally stick themselves. Although the company used Chinese
manufacturers for earlier offerings, syringes pre-loaded with
medications are subject to stringent U.S. Food and Drug
Administration rules.

Unilife in March 2011 began making its syringes at a $32
million, 165,000-square-foot plant it built in York,
Pennsylvania. “The very thing in the U.S.A. that often-times we
complain about --the complexity of the rules and the regulations
-- works for us,” says Chief Executive Officer Alan Shortall.
“FDA compliance is the main reason we’re here.”

Even with strong Mandarin skills, Brian Bethke grew
frustrated with manufacturing in China. The co-founder of
Pigtronix, which makes pedals that create electric guitar sound
effects, discovered that he couldn’t adequately monitor quality
at Chinese factories.

Guitarist Testing

The original idea for the company was to develop products
in the U.S. and make them in China, where Bethke was living.
After several years of finding technical glitches in as many as
30 percent of pedals, the company decided to move production to
Port Jefferson, New York. At its small factory in a Long Island
office park, the company can run multiple tests on its products
and even has a guitarist play each of the 500 to 1,000 pedals it
sells monthly before they’re packed and shipped.

Pigtronix’s move back, completed three years ago, has
helped improve cash flow. While manufacturing pedals in the U.S.
can cost anywhere from three to six times as much as it does in
China, Bethke says Pigtronix benefits from not having capital
tied up in products that spend weeks in transit and then pile up
in inventory.

“In China, you have high minimum quantities you have to
order, so you’re building a couple thousand of every guitar
pedal,” Bethke says. “Your carrying costs start to get huge.”
Today the company only makes those pedals it’s confident it can
sell quickly.

While goods for U.S. consumers are less likely to be made
in China these days, overseas production may still make sense
for companies that plan to target foreign markets.

“What we’re seeing is regionalization, buying stuff from
manufacturers in the region where you’re going to sell it,”
says Michael Degen, CEO of Nortech Systems Inc., a contract
manufacturer based in Wayzata, Minnesota, that has eight
factories in the U.S. and one in Mexico. “It’s very
noticeable,” he says. “We’ve seen movement in terms of
manufacturing in country for country.”